[SINGAPORE] THE global economy has to accept the fact that the United States Federal Reserve will have to start paring its asset-buying stimulus at some point.
What countries should do ahead of the US central bank's expected tapering of the stimulus programme is to start preparing themselves early, said Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.
He made these points after a meeting with visiting US Treasury Secretary Jacob Lew yesterday.
The world's stock markets have taken a hit amid mounting speculation that Washington could begin cutting its US$85 billion a month economic stimulus programme from as early as next month.
Weighing in on the issue of market jitters and speculation about tapering, Mr Tharman said: "At some point, the Fed will have to start tapering. Whether it tapers in December or sometime next year will eventually be (only) a footnote in history.
"At some point, it's going to have to taper - and it's important for all of us to start preparing for this eventuality."
What this means is that all countries must, among other priorities, put in place domestic reforms, raise productivity, and liberalise and remove roadblocks to infrastructure investments.
"The eventual tapering on the Fed's part will, I think, (be) a net positive for emerging Asia - a net positive as long as we respond to this likely outcome, start preparing for it now, have a little more urgency in domestic reforms," said Mr Tharman.
He revealed that Mr Lew had assured that the US was serious about getting a clear resolution of its current budget and debt impasses.
"Resolving this problem is important not just to the United States, but for the global economy and sustaining the global recovery," said Mr Tharman.
The two leaders also discussed the latest state of the Trans-Pacific Partnership (TPP) negotiations, which are now in the final stages after three years of talks and are expected to be concluded soon.
The US-led TPP talks involve 12 Pacific Rim countries, including Singapore. The TPP is billed as the world's largest free-trade agreement and accounts for about a third of world trade and nearly 40 per cent of the global economy.
"We are both committed to achieving a high-standard TPP agreement that will ultimately boost trade, boost investment and boost job creation in all our countries. Our negotiators are working intensively to resolve the outstanding issues," said Mr Tharman.
The aim is still to strike a deal by year-end, and Mr Tharman said that every country involved "should try our best" to reach a consensus.
The negotiators from the 12 countries are set to meet in Salt Lake City in the US next week before Singapore hosts the next TPP Ministerial Meeting in December.
Separately, Mr Lew also met Prime Minister Lee Hsien Loong at the Istana, where they exchanged views on international and regional developments, including the global economic and financial outlook.
Mr Lew's two-day trip to Singapore, which ended yesterday, was the second leg of his five-nation swing through Asia that began earlier this week in Japan and will wrap up in China.